IMF Executive Board Concludes 2022 Article IV Consultation with United Arab Emirates

IMF News, June 26, 2023

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IMF Executive Board Concludes 2022 Article IV Consultation with United Arab Emirates

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Bibliographic details

• Published: June 26, 2023

Overview and 2022 performance

• Overall growth is expected to reach 6.9 percent in 2022.
• Real non-hydrocarbon GDP growth of 5.3 percent in 2022.
• Hydrocarbon GDP is expected to grow by 11.1 percent in 2022, following the OPEC+ agreement.
• Inflation rose with global trends and is expected to ease to 3.4 percent in 2023.
• Fiscal and external surpluses are expected to remain high on the back of elevated oil prices.
• Banks are adequately capitalized and liquid overall, but nonperforming loans remain elevated, albeit down from recent peaks.
• Real estate prices have risen sharply in some segments.
• Major efforts advanced under the National AML/CFT Strategy and Action Plan to further strengthen the regulatory regime in line with enhanced Financial Action Task Force monitoring.

Outlook and risks

• Overall GDP is projected to grow at 3.6 percent in 2023.
• Non-hydrocarbon growth projected at 3.8 percent in 2023, driven by continued tourism activity and increased capital expenditure.
• Outlook subject to significant global uncertainties, including:
  • Weaker growth,
  • Tighter financial conditions,
  • Geopolitical developments.
• Implementation of enhanced UAE reform efforts poses upside risks to medium-term growth.

Executive Board assessment and main policy recommendations

• Commendations:
  • Effective COVID response, timely policy actions, and structural reform implementation.
  • Strong growth further supported by high oil prices.
• Fiscal policy:
  • Encourage maintaining a prudent fiscal stance in the near term while ensuring targeted support to those most in need.
  • Consider a well-communicated withdrawal of remaining crisis-related macro-financial support.
  • Additional fiscal reforms urged to broaden and diversify the revenue base and support adjustment to a lower carbon future.
  • Welcome progress to enhance non-hydrocarbon revenue, including through the corporate income tax.
  • Call for continued improvements to expenditure efficiency.
  • Embed fiscal reforms in a credible medium-term fiscal framework, underpinned by stronger coordination of emirate-specific fiscal frameworks to support modest growth-friendly annual consolidation.
  • Continue efforts to improve fiscal transparency and strengthen governance and accountability by publishing general government, emirate- and federal-level fiscal data.
• Financial sector:
  • Stress on ensuring financial system health to guard against risks and foster medium-term growth.
  • Continued close monitoring of financial stability risks and further strengthening of macroprudential frameworks warranted, given high nonperforming loans, tightening financial conditions, and banks’ exposures to the real estate sector.
  • Welcome major efforts under the National AML/CFT Strategy and Action Plan; encourage continued actions to strengthen the regulatory regime in line with enhanced FATF monitoring.
  • Encourage the authorities to request a Financial Sector Assessment Program update to further assess resilience.
• Structural reforms and diversification:
  • Welcome ambitious structural reform agenda, including investment in digital and green initiatives to advance diversification and support a smooth energy transition.
  • Recommend additional measures to improve the business environment and modernize the labor market, including continuing to encourage greater female participation.
  • Welcome development of trade and economic partnerships expected to boost productivity and competitiveness.
  • Encourage continued improvements in the collection and timely dissemination of economic data to support reform efforts.

Selected economic indicators, 2020–23 (exact figures)

• Quota: SDR 2,311.2 million (November 2022)
• Population: 9.56 million (2021)
• Per capita GDP: $43,422 (2021)

Output and prices (Annual percent change)

• Real GDP: 2020: -5.0; 2021: 3.9; 2022: 6.9; 2023 (Proj.): 3.6
• Real nonhydrocarbon GDP: 2020: -5.4; 2021: 5.8; 2022: 5.3; 2023 (Proj.): 3.8
• CPI inflation (average): 2020: -2.1; 2021: 0.2; 2022: 4.9; 2023 (Proj.): 3.4

Public finances (Percent of GDP)

• Revenue: 2020: 28.7; 2021: 30.4; 2022: 35.5; 2023 (Proj.): 33.0
• Expenditures: 2020: 31.1; 2021: 26.4; 2022: 26.3; 2023 (Proj.): 27.8
• Net lending(+)/borrowing(-) (Revenue minus expenditures): 2020: -2.5; 2021: 4.0; 2022: 9.2
• Nonhydrocarbon primary balance 1/ (In percent of nonhydrocarbon GDP): 2020: -22.9; 2021: -20.5; 2022: -21.1; 2023 (Proj.): -22.6
• Gross general government debt: 2020: 41.1; 2021: 35.9; 2022: 30.2; 2023 (Proj.): 29.8

Monetary sector

• Broad money: 2020: 4.6; 2021: 6.8; 2022: (no value listed)
• Credit to private sector: 2020: -2.6; 2021: 1.5; 2022: 7.3; 2023 (Proj.): 5.2

External sector (In percent of GDP, unless otherwise indicated)

• Current account balance: 2020: 6.0; 2021: 11.6; 2022: 11.7; 2023 (Proj.): 7.6
• External debt: 2020: 110.0; 2021: 97.3; 2022: 85.3; 2023 (Proj.): 86.8
• Gross official reserves (billions of U.S. dollars) 2/: 2020: 106.5; 2021: 127.8; 2022: 130.9
• In months of next year's imports of goods & services, net of re-exports: 7.2

Notes:

• 1/ In percent of nonhydrocarbon GDP. Excludes staff estimates of SWF investment income; partial coverage of Abu Dhabi government and Abu Dhabi pension fund accounts.
• 2/ Excludes staff estimates of foreign assets of sovereign wealth funds; includes the 2021 SDR allocation of SDR 2.2 billion.

Press Release No. 23/234; June 26, 2023. IMF Communications Department.

References

• United Arab Emirates and the IMF
• IMF Policy Advice -- A Factsheet
• Press Releases
• PRESS CENTER
• http://www.IMF.org/external/np/sec/misc/qualifiers.htm
• https://www.imf.org/en/home